Q4 2023 Proto Labs Inc Earnings Call

At this time all participants are in a listen only mode.

Operator: The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference... Press star zero from your telephone keypad. Please note, this conference is being recorded. At this time, I'll now turn the conference over to Jason Frank, Vice President and Corporate Controller. Frank, you may begin.

And the answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero from your telephone keypad.

Please note this conference is being recorded.

At this time I'll now turn the conference over to Jason Franklin.

Jason Franklin: Vice President and corporate controller, Mr. Franklin you may begin.

Jason Frank: Thank you, Rob, and welcome everyone to Proto Labs' fourth quarter and full year 2023 earnings conference call. I'm joined today by Rob Bedore, President and Chief Executive Officer, and Dan Schumacher, Chief Financial Officer. This morning, Proto Labs issued a press release announcing its financial results for the fourth quarter and full year ended December 31st, 2023. The release is available on the company's website.

Jason Franklin: Thank you, Rob and welcome everyone to Proto labs fourth quarter and full year 2023 earnings conference call.

Jason Franklin: I'm joined today by Robin door, President and Chief Executive Officer, and Dan Schumacher Chief Financial Officer.

Jason Franklin: This morning, Proto labs issued a press release announcing its financial results for the fourth quarter and full year ended December 31 2023.

Jason Franklin: <unk> is available on the company's website.

Jason Frank: In addition, a prepared slide presentation is available online at the web address provided in our press release. Our discussion today will include statements relating to future performance and expectations that are or may be considered forward-looking statements and subject to many risks and uncertainties that could cause actual results to differ materially from expectations. Please refer to our earnings press release and recent SEC filings, including our annual report on Form 10-K, for information on certain risks that could cause actual outcomes to differ materially and adversely from any forward-looking statements made today. The results and guidance we will discuss include non-GAAP financial measures consistent with our past practice. Please refer to our press release and the accompanying slide presentation in the Investor Relations section of our company website for a complete reconciliation of GAAP to non-GAAP results. Now, I'll turn the call over to Rob Baddour.

Jason Franklin: In addition, a prepared slide presentation is available online at the web address provided in our press release.

Jason Franklin: Our discussion today will include statements relating to future performance and expectations that are or may be considered forward looking statements and subject to many risks and uncertainties that could cause actual results to differ materially from expectations.

Jason Franklin: Please refer to our earnings press release, and recent SEC filings, including our annual report on Form 10-K for information on certain risks that could cause actual outcomes to differ materially and adversely from any forward looking statements made today.

Jason Franklin: The results and guidance, we will discuss include non-GAAP financial measures consistent with our past practice. Please refer to our press release and the accompanying slide presentation at the Investor Relations section of our company website for a complete reconciliation of GAAP to non-GAAP results.

Jason Franklin: Now I'll turn the call over to Rob to Dora Roberts.

Rob Bedore: Rob. Thanks, Jason. Good morning, everyone, and thank you for joining us on our fourth quarter and full year 2023 earnings call. We continue to execute well on our priorities through the fourth quarter, resulting in a record year and strong financial and operational results. For the full year 2023, we generated revenue above $500 million for the first time in Proto Labs' 25-year history while delivering improved earnings, robust cash flow, and returning substantial capital to shareholders. Every day at Proto Labs, we're guided by our mission, which is to empower the world's most innovative companies to bring their new ideas to market by offering the fastest and most comprehensive digital manufacturing.

Rob: Thanks, Jason.

Rob: Good morning, everyone and thank you for joining our fourth quarter and full year 2023 earnings call.

Rob: We continue to execute well on our priorities through the fourth quarter, resulting in a record year and strong financial and operational results.

Rob: For the full year 2023, we generated revenue above $500 million for the first times in total lapsed 25 year history, while delivering improved earnings robust cash flow and returning substantial capital to shareholders.

Rob: [noise] everyday at Proto labs, we're guided by our mission, which is to empower the world's most innovative companies to bring their new ideas to market by offering the fastest and most comprehensive digital manufacturing service.

Rob Bedore: We manufacture high-quality, custom, complex parts for the next generation of innovative solutions to the world's challenges. I'll now share a few examples of how we enable customers to accelerate innovation across pioneering industries. First, I want to share two examples from the electric vehicle industry, which is a growing sector of our business. Proto Labs has been heavily involved in creating a more sustainable future through the electrification of vehicles with various customers.

Rob: We manufacture high quality custom complex parts for the next generation of innovative solutions to the world's challenges.

Rob: I'll now share a few examples of how we enable customers to accelerate innovation across pioneer in industries.

Rob: Yeah.

Rob: First I want to share two examples from the electric vehicle industry, which is a growing sector of our business.

Rob: Total Ams has been heavily involved in creating a more sustainable future through the electrification of vehicles with various customers.

Rob Bedore: One prominent EV manufacturer has been a Proto Labs factory customer for years, as our reliable and rapid lead times help them move fast and bridge supply chain challenges as they introduce new vehicles and options. This customer recently received their first order fulfilled through our manufacturing partner network, which we rebranded from Hubs to Proto Labs Network in January. Proto Labs Network manufactured quality injection-molded prototype parts, which were beyond our factory's capabilities due to their size and complexity. As EV manufacturers have very different development and supply chain requirements than traditional auto manufacturers,

Rob: One prominent EV manufacturer, that's been a proto labs factory customer for years as a reliable and rapidly times help them move faster and bridge supply chain challenges as they introduce new vehicles and options.

Rob: Customer recently received their first order fulfilled through our manufacturing partner network, which we rebranded from hubs Proto Labs network in January.

Rob: Proto labs network manufactured quality injection molding prototype parts, which were beyond our factories capabilities due to their size and complexity.

Rob: Its E V manufacturers have very different development and supply chain requirements that traditional auto manufacturers.

Rob Bedore: The flexibility of our combined offerings provides the agility and adaptability that EV manufacturers need. We are incredibly excited to continue our work with this customer and help create a more sustainable future through Emissions Preview. In addition to electric cars, our advanced digital manufacturing capabilities also support innovation in the electric aerospace industry. HiNetX, a company that has developed an electric motor for commercial regional jets and narrow-body aircraft, leveraged our manufacturing precision and speed to have a new complex metal component manufactured. This part was 3D printed in our digital factory due to its complex design that maximizes surface area and improves the power-to-weight ratio.

Rob: The flexibility of our combined offering provides the agility and adaptability that you'd be manufacturers need.

Rob: We are incredibly excited to continue our work with this customer and help create a more sustainable future through emissions free vehicles.

In addition to electric cars are advanced digital manufacturing capabilities also support innovation in the electric aerospace industry.

Rob: <unk> a company that has developed an electric motor for commercial regional jets, and narrow body aircrafts leveraged our manufacturing precision and speed to have a new complex metal component manufacturer.

This part was three D printed in our digital factory due to its complex design.

Rob: That maximizes surface area and improves the power to weight ratio.

Rob Bedore: Our services allow Hynetics to accelerate innovation in aircraft motors. Proto Labs is also involved in rapid innovation in the commercial space exploration sector, where speed to market is critical. Our ability to quickly provide high-quality precision parts through comprehensive manufacturing services allows companies like Space Inventor to develop satellite systems and advance aerospace technology. Space Inventor turned to Proto Labs in order to meet stringent project requirements. We manufactured several CNC machined components for structural elements and complex brackets and a variety of specialized materials for their set.

Rob: Our services allow high medics to accelerate innovation and aircraft motors.

Rob: Proto labs is also involved in rapid innovation and the commercial space exploration sector, where speed to market is critical.

Rob: Our ability to quickly provide high quality precision parts through comprehensive manufacturing services allows companies like space and vendor to develop satellite systems and advanced Aerospace technology.

Rob: <unk> inventor turned to Proto labs in order to meet stringent project timelines, we manufactured several CNC machine components, the structural elements and complex brackets and a variety of specialized materials for their satellites.

Rob Bedore: Crucially, with our industry-leading turnaround times, we rapidly manufactured and delivered quality components while significantly expediting space inventors' design processes. One final example to highlight today comes from the Agricultural Machinery Institute. Proto Labs recently worked with a leading equipment manufacturer that drives sustainable progress in agriculture. This customer had an unexpected delay arise at an existing supplier.

Rob: Crucially with our industry, leading turnaround times, you rapidly manufactured and delivered quality components, while significantly expediting space Adventures design process.

Rob: One final example to highlight today.

Rob: It comes from the agricultural machinery industry.

Rob: Elapsed recently worked with a leading equipment manufacturer that drives sustainable progress in agriculture. This customer had an unexpected delay arise at an existing supplier.

Rob Bedore: When supply chain disruptions arise, Proto Labs always has capacity available to ensure customers can continue to innovate. We provide quality, cost-efficient CNC machine components through both the factory and the network. Proto Labs' speed and comprehensive offering allowed this customer to meet scheduled phase gates and keep a critical program on track. These are just four short examples of the innovations we get to accelerate every day in exciting industries that positively impact the world. We served over 53,000 customers in 2023 and empowered customer innovations in many different applications. I'm proud to say that in 2023, we contributed to the greater good while successfully executing against our business priorities. 2023 was a success for Proto Labs.

Rob: When supply chain disruptions arise Proto labs always has capacity available to ensure customers can continue to innovate.

Rob: We provided quality cost efficient CNC machine components through both the factories and the network.

Proto labs speed and comprehensive offering allowed this customer to meet scheduled phase gates and keep a critical program on track.

Rob: These are just four short examples of the innovations, we get to accelerate everyday and exciting industries, which positively impact the world.

Rob: We served over 53000 customers in 2023 and empowered customer innovations in many different applications I'm proud to say that in 2023, we contributed to the greater good while successfully executing against our business priorities.

Rob: Yeah.

Rob: 2023, it was a successful Proto labs, we confirm that our strategy to combine the factory in network offers is the right one demonstrated by 70% growth in Proto Labs' network and continued customer adoption of the combined offering.

Rob Bedore: We confirmed that our strategy to combine the factory and network offers is the right one, demonstrated by 70% growth in Proto Labs' network and continued customer adoption of the combined offer. In the presence of a challenging global manufacturing demand environment that experienced contraction throughout the year, our comprehensive offering enabled Proto Labs to take share in our market. Our leadership team executed on our strategic objectives, and I'm proud of what we have. As you'll recall, we entered 2023 with two priority areas. First, to narrow our focus to drive revenue growth in our two largest services, injection molding and CNC machining, and second, to improve shareholder value through increased profitability. I am pleased to report that we have successfully delivered on both of those priorities.

Rob: In the presence of a challenging global manufacturing demand environment that experienced contraction throughout the year, our comprehensive offerings enabled proto labs to take share in our market.

Rob: Our leadership team executed on our strategic objectives, and I'm proud of what we accomplished.

Rob: As you'll recall, we entered 2023 with two priority areas first to narrow our focus to drive revenue growth in our two largest services injection molding and CNC machining.

Rob: And second to improve shareholder value through increased profitability.

Rob: I am pleased to report that we successfully delivered on both of those priorities.

Rob Bedore: On our fourth quarter earnings call one year ago, we stated that we expected year-over-year growth in injection molding for the full year. We met our goal of Achieving Injection Molding Growth in 2023, driven by the value we provide as a single source injection molded parts supplier, winning larger orders with strategic partners. Investments in digital quality, competitive pricing, and consultative design services have contributed to success with larger production-oriented work.

Rob: On our fourth quarter earnings call one year ago, We stated that we expected year over year growth in injection molding for the full year.

Rob: We met our goal.

Rob: <unk> injection molding growth in 2023, driven by the value we provide as a single source injection molded parts supplier, winning larger orders with strategic customers.

Rob: Investments in digital quality competitive pricing and Consultative design services has contributed to success with larger production oriented orders.

Rob Bedore: Collectively, these investments have been key to transforming our injection molding business, allowing Proto Labs to serve as a true strategic partner for our customers. In addition, we continue to win more injection molding orders where our customers benefit from our combined factory and network. In our other priority growth area, CNC machining, we successfully unlocked greater growth potential through the most complete and comprehensive offering in the industry. CNC machining revenue fulfilled by the Proto Labs network grew 80% in 2020. Customers took advantage of the combined offer, leveraging lower park prices at longer lead times, improved tolerances, broader finishing options, and larger and more complex park designs through the Proto Labs network.

Rob: Collectively these investments have been key to transforming our injection molding business, allowing proto labs to serve as a true strategic partner for our customers.

Rob: In addition, we continue to win more injection molding orders, where our customers benefit from combined factory in network.

Rob: And our other priority growth area CNC machining, we successfully unlocked greater growth potential through the most complete and comprehensive offer in the industry.

Rob: CNC machining revenue fulfilled by the Proto Labs network grew 80% in 2023.

Rob: Customers took advantage of the combined offer leveraging lower power prices at longer lead times improved tolerances broader finishing auctions and larger and more complex part designs through the prototypes network.

Rob Bedore: We also invested to expand our CNC offer in the digital factory, launching scaled plating and anodizing at our best in class. Finally, in 2023, we drove shareholder value through improved profitability and returning capital to shareholders. Proto Labs' differentiated business model generated significant profitability and cash flow throughout the year. Both factory and network gross margins improved year over year, and 2023 non-GAAP earnings per share grew 6% over 2022. We generated $73 million in cash from operations, the highest in our industry.

Rob: We also invested to expand our CNC offer in the desert factory launching scaled bleeding and amortizing at our best in class lead times.

Rob: Finally in 2023, we drove shareholder value through improved profitability and returning capital to shareholders Proto labs.

Rob: Differentiated business model generated significant profitability and cash flow throughout the year.

Rob: Both factory and network gross margins improved year over year.

Rob: And 2023 non-GAAP earnings per share grew 6% over 2022.

Rob: We generated $73 million in cash from operations the highest in our industry.

Rob Bedore: And we paid back 97% of our free cash flow to shareholders through $44 million in share repurchase. Our strong execution on the strategic priorities set out at the beginning of 2023 provides a robust foundation for continued success in 2020. This year, we expect to grow revenue. To do so, our 2024 priority areas are as follows.

Rob: And we paid back 97% of our free cash flow to shareholders through $44 million in share repurchases.

Rob: Our strong execution on our strategic priorities set out at the beginning of 2023 provides a robust foundation for continued success in 2024.

Rob: This year, we expect to grow revenue.

Rob: To do so our 2024 priority areas are as follows.

Rob Bedore: First, we will strive to increase revenue per customer by growing the number of customers using the combined factory and network offer. And second, we will drive larger orders in all services. Success in these priority areas will lead to improved financial performance and continued shareholder value creation. Specifically, we're focused on driving growth in users of the combined offer, which will drive revenue through both the factory and the network. This number increased substantially in 2023, and I expect significant growth in 2024. Our go-to-market teams are aligned and well-equipped to promote and sell the combined offer to existing and new customers.

Rob: First we will strive to increase revenue per customer by growing the number of customers using the combined factory in network offer and second we will drive larger orders in all services.

Rob: Success in these priority areas will lead to improved financial performance and continued shareholder value creation.

Rob: Specifically, we're focused on driving growth in users of the combined offer which will drive revenue through both the factory in the network.

Rob: This number increased substantially in 2023, and I expect significant growth in 2024.

Our go to market teams are aligned and well equipped to promote and sell the combined offer to existing and new customers.

Rob Bedore: Next, our emphasis on driving larger orders through both the factory and the network includes a shift from prototyping to production, which is a larger overall market, specifically for Injection Molding, which has the highest revenue per customer of our four services. We will focus on satisfying the needs of production customers. With its lower price, longer lead time offer, the Proto Labs network generates higher average order values than the factory, and we will expand on these larger orders through the network in 2024. These areas of emphasis highlight the importance of increasing Wallet's customer share.

Rob: Next our emphasis on driving larger orders through both the factory and the network includes a shift from prototyping to production, which is a larger overall market.

Rob: Specifically for injection molding, which has the highest revenue per customer of our <unk> services, we will focus on satisfying the needs of the production customer.

Rob: With its lower price longer lead time offer the prototypes Proto labs network generates higher average order values and the factory and we will expand on these larger orders through the network in 2024.

Rob: These areas of emphasis highlight the importance of increasing customer share of wallet.

Rob Bedore: Since our initial public offering in 2012, our primary focus was to add new customers while continuing to serve our existing customers in their times of need. While this is still important, our focus with the combined offer is to go deeper with larger strategic customers and serve more of their custom parts needs as a true prototype to production single source supply. In 2024, we will also continue to invest in our most important internal resource, our people. Proto Labs employees enable us to continue revolutionizing manufacturing and accelerating innovation. Proto Labs is a great place to work, and we will improve the employee experience through continued investments in areas like talent acquisition, training, and development, and total reward.

Rob: Since our initial public offering in 2012, our primary focus was to add new customers, while continuing to serve our existing customers and their times of need.

Rob: While this is still important our focus with the combined offer is to go deeper with larger strategic customers and serve more of their custom parts needs as a true prototype to production single source supplier.

Rob: In 2024, we will also continue to invest in our most important internal resource our people.

Rob: Proto labs employees enabled us to continue revolutionizing manufacturing and accelerating innovation.

Rob: Labs is a great place to work and we will improve the employee experience through continued investments in areas like talent acquisition training and development and total rewards.

Rob Bedore: Just a few weeks ago, at our annual kickoff meetings, we introduced a fully refreshed set of company values for the first time in over 10 years to help guide us into the future. We look forward to doing more for and investing in our amazing talent at Proto Labs this year and beyond. We are encouraged by our strong finish to 2023 and believe we have the right strategy and priorities in place for continued success. Resilient execution in 2023 enabled us to meet our commitments and take share in the market despite headwinds from manufacturing contractors. We remain focused on becoming the strategic partner to the world's innovators, maintaining our industry-leading financial model. The Bulletproof Executive 2013, I want to thank our more than 2,400 employees for delivering excellent 2023 results and positioning the company for success and value creation in 2024 and beyond. Thank you for your continued commitment to Proto Labs. Dan will now provide fourth quarter and full year financial information as well as our outlook for the first quarter of 2024. Yeah. Thanks, Rob. And good morning, everyone.

Rob: Just a few weeks ago at our annual kickoff meetings, we introduced a fully refreshed set of company values for the first time in over 10 years to help guide us into the future.

Rob: We look forward to doing more for and investing in our amazing talented Proto labs this year and beyond.

We are encouraged by our strong finish to 2023 and believe we have the right strategy and priorities in place for continued success Brazil.

Rob: Resilient execution in 2023 enabled us to meet our commitments and take share in the market despite headwinds from manufacturing contraction.

Rob: We remain focused on becoming a strategic partner to the world's innovators.

Rob: Maintaining our industry, leading financial model and increasing value for our shareholders.

Speaker Change: I want to thank our more than 2400 employees for delivering excellent 2023 results and positioning the company for success and value creation in 2024 and beyond.

Speaker Change: Thank you for your <unk>.

Speaker Change: Continued commitment to Proto labs.

Speaker Change: Yes.

Speaker Change: Dan will now provide our fourth quarter and full year financial information as well as our outlook for the first quarter of 2024.

Speaker Change: Yeah.

Dan Schumacher: Thanks, Rob and good morning, everyone. Our financial results begin on slide 13 of the slide presentation.

Dan Schumacher: Our financial results begin on slide 13 of the slide presentation. Looking first at fourth quarter performance, revenue of $125 million grew 7.2% year-over-year in constant currency. Proto Labs network revenue was $22.5 million in the quarter, up 49% in constant currency.

Dan Schumacher: Looking first at fourth quarter performance revenue of 125 million grew seven 2% year over year in constant currencies Proto.

Dan Schumacher: <unk> network revenue was $22 5 million in the quarter up 49% in constant currencies.

Dan Schumacher: Looking at revenue by service on slide 15, fourth quarter injection molding revenue grew approximately 14% year over year in constant currencies, as we saw an increase in larger part orders. CNC machining revenue grew 4% year-over-year in constant currencies driven by continued growth through Proto Labs' network. Fourth quarter 3D printing revenue grew 3% year over year in constant currency. Chief Federal revenue declined 8% year-over-year in constant currency.

Dan Schumacher: Looking at revenue by service on Slide 15.

Dan Schumacher: Fourth quarter injection molding revenue grew approximately 14% year over year in constant currencies as we saw an increase in larger parts of orders.

Dan Schumacher: CNC machining grew 4% year over year in constant currency driven by continued growth through Proto labs network.

Dan Schumacher: Fourth quarter three D printing revenue grew 3% year over year in constant currencies cheap.

Dan Schumacher: Cheap metal revenue declined 8% year over year in constant currencies.

Dan Schumacher: Fourth quarter non-GAAP gross margin decreased 70 basis points sequentially to 45.3%, primarily due to lower factory volume. Fourth quarter Proto Labs network non-GAAP gross margin was 33.6% compared to 33.7% in the third quarter. Fourth quarter non-GAAP diluted net income per share was $0.46.

Dan Schumacher: Fourth quarter non-GAAP gross margin decreased 70 basis points sequentially to 45, 3%, primarily due to lower factory volume.

Dan Schumacher: Fourth quarter Proto Labs network non-GAAP gross margin was 33, 6% compared to 33, 7% in the third quarter.

Dan Schumacher: Fourth quarter non-GAAP diluted net income per share was <unk> 46.

Dan Schumacher: Adjusted EPF came in higher than our guidance midpoint of $0.30 for several reasons. First, it was higher than expected value. Revenue came in at the top end of our guidance range. Next, gross margin exceeded our expectations in the fourth quarter due largely to stronger than anticipated revenues and injection molding, one of our higher margin services. Lastly, our fourth quarter selling general and administrative expenses were below forecast, driven partially by lower incentive compensation. Turning to cash flow and balance sheet highlights on slide 16. Cash flow from operations was $17.2 million, and we repurchased $4.9 million of common shares in the fourth quarter.

Dan Schumacher: Adjusted EPS came in higher than our guidance midpoint of 34.

Dan Schumacher: For several reasons.

Dan Schumacher: First higher than expected volume revenue came in at the top end of our guidance range.

Dan Schumacher: Gross margin exceeded our expectations in the fourth quarter due to due largely to stronger than anticipated revenues in injection molding one of our higher margin services.

Dan Schumacher: Lastly, our fourth quarter, selling general and administrative expenses were below forecast driven partially by lower incentive compensation.

Dan Schumacher: Turning to cash flow and balance sheet highlights on slide 16.

Dan Schumacher: Cash flow from operations was $17 2 million and we repurchased $4 9 million of common shares in the fourth quarter.

Dan Schumacher: On December 31st, 2023, we had $110.8 million of cash and investments on our balance sheet and zero debt. Now, let's look at some of these results for the full year, which begins on slide 18. Total revenue increased 5% over 2022 in constant currencies and excluding Japan. At $504 million, total revenue surpassed $500 million for the first time in our history. Both factory and network gross margins increased year over year. However, total company gap gross margins were flat at 44.1% due to a higher mix of network revenue.

Dan Schumacher: On December 31, 2023, we had $110 8 million of cash and investments on our balance sheet and zero debt.

Dan Schumacher: Now, let's look at some of these results for the full year, which begin on slide 18.

Dan Schumacher: Total revenue increased 5% over 2022 and constant currencies and excluding Japan.

Dan Schumacher: At 504 million total revenue surpassed $500 million for the first time in our history.

Dan Schumacher: Both factory and network gross margins increased year over year.

Dan Schumacher: Total company GAAP gross margins were flat at 44, 1% due to a higher mix of network revenue.

Dan Schumacher: In 2023, Proto Labs network revenue of $82.6 million grew 69% year over year in constant currency, and network gross margin for the full year was 30.6% compared to 25.8% in 2022. We served 53,464 customer contacts in 2023, and revenue per contact increased 9% over 2022. In 2023, non-GAAP earnings per share increased 6% to $1.59, and we generated $83.2 million in adjusted EBIT dollars. Cash generated from operations in 2023 was $73.3 million, up from $62.1 million in 2022. Our business model generates industry-leading cash flows, allowing us to invest in organic growth and return capital to shareholders. During 2023, we paid 97% of our free cash flows to shareholders through share repurchases.

Dan Schumacher: 2023 portal at the network revenue of $82 6 million grew 69% year over year in constant currencies.

Dan Schumacher: And network gross margin for the full year was 36% compared to 25, 8% in 2022.

Dan Schumacher: We served 53464 customer contacts in 2023 and revenue per contract increased 9% over 2022.

Dan Schumacher: 2023, non-GAAP earnings per share increased 6% to $1 59, and we generated $83 2 million and adjusted EBITDA.

Dan Schumacher: Cash generated from operations in 2023 was $73 3 million up from $62 1 million in 2022.

Dan Schumacher: Our business model generates industry, leading cash flows, allowing allowing us to invest in organic growth and return capital to shareholders during.

Dan Schumacher: During 2023, we paid 97% of our free cash flows to shareholders through share repurchases.

Dan Schumacher: Turning now to Forward-Looking Guidance. We will continue to guide on a quarterly basis due to the quick-turn nature of our business and continued macroeconomic uncertainty. Our guidance for the first quarter of 2024 is outlined on slide 23. We expect to generate first quarter 2024 revenue between $120 and $128 million.

Speaker Change: Turning now to forward looking guidance.

Speaker Change: We will continue to guide on a quarterly basis due to the quick turn nature of our business and continued macroeconomic uncertainty.

Speaker Change: Our guidance for the first quarter of 2024 as outlined on slide 23, we.

Speaker Change: We expect to generate first quarter of 2020 for revenue between 120 and $128 million.

Dan Schumacher: This guidance reflects a softer start to 2024 due to December and early January order levels being lower than historical periods. However, recent performance has been more in line with historical trends, and our guidance assumes that will continue through the end of March. We expect foreign currency to have between a $500,000 and $1 million favorable impact on revenue compared to the first quarter of 2023. Moving on to earnings guidance. We anticipate non-GAAP add-backs in the first quarter to include stock-based compensation expense of approximately $4.5 million and amortization expense of $1 million. We currently estimate a non-GAAP effective tax rate of 21%, plus or minus 50 basis points, for the first quarter.

Speaker Change: This guidance reflects a softer start to 2024 due to December and early January order levels being lower than historical periods.

Speaker Change: However, recent performance has been more in line with historical trends and our guidance assumes that we'll continue through the end of March.

Speaker Change: We expect foreign currency to have between a 500000 and $1 million favorable impact on revenue compared to the first quarter of 2023.

Speaker Change: Moving to earnings guidance, we anticipate non-GAAP add backs in the first quarter to include stock based compensation expense of approximately $4 5 million and amortization expense of $1 million.

Speaker Change: We currently estimate our non-GAAP effective tax rate of 21% plus or minus 50 basis points in the first quarter.

Operator: In summary, we expect first quarter non-GAAP earnings per share between 26 and 34 cents. That concludes our prepared remarks. Operator. Thank you. We'll now be conducting a question and answer session. If you would like to ask a question at this time, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Speaker Change: In summary, we expect first quarter non-GAAP earnings per share between <unk> 26, and <unk> 34.

Speaker Change: That concludes our prepared remarks.

Speaker Change: Operator.

Speaker Change: Thank you.

Speaker Change: Well that'd be conducting the question and answer session.

Speaker Change: If you'd like to ask a question at this time. Please press star one from your telephone keypad.

Speaker Change: Information telling them indicate your line is in the question queue.

Speaker Change: You May press star two who'd like to remove your question from the queue.

Operator: For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Thank you, and our first question comes from the line of Brian Drab with William Blair. Please proceed with your question. Good morning.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: One moment, please while we poll for questions.

Speaker Change: Thank you and our first question comes from the line of Brian Drab with William Blair. Please proceed with your questions.

Brian Drab: Congratulations on a really solid year in a tough environment. Thanks, Brian. Hey, so first, just a word about the terminology changes there from, you know, now you're using customer contacts. I mean, basically, it's a longer term, you know, unique product developers, engineers served. I guess it's just being more efficient with words, or is there any difference in those? Yeah, thank you for the question.

Brian Drab: Good morning, congratulations on a really solid year in a tough environment.

Brian Drab: Thanks, Brian.

Speaker Change: Okay. So firstly, just a theres no significance really in the terminology changes there from now.

Speaker Change: Now you're using customer contacts and clean.

Speaker Change: Previously I thought.

Speaker Change: Our longer term unique product developers engineers served I guess, it's just.

Brian Drab: Being more efficient with with words or or is there any wealth in those terms yeah. Thank you for the question I think you know what what.

Rob Bedore: I think, you know, what we're looking to signal is that while in the past, our customers were primarily engineers and product designers, given that our business was primarily a prototyping business. You can see that a lot of our growth in 23 came from an increase in production, right? And customers using us more deeply for higher volumes and taking the prototyping business that they've been used to using us for and converting that into production, staying with us through the product life cycle. And so we just found that naming all our customers product designers is probably not correct anymore, right? So that's why we made that decision. Yeah, that makes sense.

Speaker Change: What we're looking to to signal is that.

Speaker Change: What we're seeing as well in the past our customers were primarily.

Speaker Change: Engineers and product designers given that our business was primarily a prototyping business.

Speaker Change: You can see that a lot of our growth in 'twenty three came from increase in production right and customers using us more deeply for higher volumes.

Speaker Change: And taking the prototyping business.

Speaker Change: That they've been used to using us for and converting that into production staying with us through the product lifecycle.

Speaker Change: And so we just found that.

Speaker Change: Meaning all of our customers.

Speaker Change: Designers is probably not.

Speaker Change: Not correct anymore right. So that's that's why we made that change.

Rob Bedore: And that's a good segue into my next question, which is that, you know, when you look at the revenue per contact, then this year, it's up 10%. And I guess that that's mainly attributable to your success going deeper with these enterprises, you know, going deeper with the big customers and doing more production work. Is that a trend, I guess, that we should continue, you know, as you're looking into 2024 now? Do you expect that you could..., you know, grow that revenue per contact substantially again in 2024? Yeah, absolutely.

Speaker Change: That makes sense.

Speaker Change: It's a good segue into my next question is that you know when you look at the revenue per contact then this year is up 10%.

Speaker Change: And I guess that that's mainly attributable to your success going deeper with these.

Speaker Change: Enterprises.

Speaker Change: Going deeper with the big customers and doing more production work.

Speaker Change: Is that a trend I guess that we should continue you know as youre looking into 2024 now.

Speaker Change: Do you expect that you can.

Speaker Change: <unk> that revenue per contact substantially again in 2024.

Speaker Change: Yeah, absolutely I'm very pleased with our increase in revenue per customer in 2023, I think it is a strong indication of the success of our strategy.

Rob Bedore: I'm very pleased with our increase in revenue per customer in 2023. I think it's a strong indication of the success of our strategy. And, you know, I want to recognize the work of our sales and marketing teams in terms of how they've engaged with our customers to make sure that they're aware of our broader capabilities in terms of production, the investments that we've made into expanding our offering both in the factory and in the network now allow us to work with our customers outside of prototyping.

Speaker Change: And I want to recognize the work of our sales and marketing teams in terms of how they are engaged with our customers to make sure that they're aware of our broader capabilities in terms of production right. The investments that we've made into expanding our offering both in the factory and in the network.

Speaker Change: Now allow us to.

Speaker Change: Work with our customers outside of prototyping.

Rob Bedore: You know, we've had, we served 53,000 customers last year, and our customers are used to partnering with us and relying on us for their prototypes. Now we can transition the prototyping work into production work, and we're starting to see good traction on that. So we will continue to report average revenue per customer and our driving to increase that number. Okay, great. And then I just want to be really clear on this or make sure that I'm clear on it.

Speaker Change: We serve 53000 customers last year.

Speaker Change: Our customers are used to partnering with us and relying on us for their prototypes and now we can transition that prototyping work into production work and we're starting to see good traction in that so we will continue to report them.

Speaker Change: Average revenue per customer and and are driving to increase that number.

Speaker Change: Okay, Great and then I just wanted to be really clear.

Speaker Change: And this will make sure that I'm clear on it.

Dan Schumacher: You know, you said in the guidance that you're assuming, I think what you're saying is that you saw the typical seasonal softness in December and January, and your guidance assumes that you don't see the seasonal, the typical seasonal uptick in March. You're kind of assuming that that seasonal softness persists through the first quarter. Am I understanding that right? Brian, Dan, thanks for the question.

Speaker Change: You said in the guidance that you're assuming I think what you're saying is that you saw the typical seasonal softness in December and January and your guidance assumes that you don't.

Speaker Change: The seasonal the typical seasonal uptick in March you kind of assuming that that seasonal softness persists through the first quarter am I understanding that right.

Speaker Change: Brian This is Dan Thanks for the question, let me reframe, so we saw lower than historical levels.

Dan Schumacher: So we saw lower than historical levels starting in mid-December, and then that persisted into January. And so things did not pick up at the same historical time; it was later than usual.

Dan Schumacher: Starting to like mid December.

Dan Schumacher: And then that that persisted into January and so things did not pick up.

Dan Schumacher: At the same historical time it was later than usual, but we're happy with where the levels are now.

Dan Schumacher: But we're happy with where the levels are now, both from an order and a quoting perspective, and the guidance assumes that we'll be at those levels through the quarter. So you saw a December that was lower than typical? Second half of December, and I don't know, Brian, you know, we were talking to customers, and a lot of them were away for a longer period of time than usual, both within Europe and the U.S. I don't know if that had something to do with the timing of the holidays, of where they were in their budgets, right as they closed the year and started the new year. But it was lower than we normally see a seasonal dip, but that dip was lower than what it had been in prior years. But now we're back on it.

Dan Schumacher: Both from an order and according perspective, and the guidance assumes that that will be at those levels through the quarter.

Dan Schumacher: So you saw a December that was lower than typical second second half of December and I don't know.

Dan Schumacher: Brian we were talking to customers.

Dan Schumacher: A lot of them work away for a longer period of time and historical both within Europe and the U S. I don't know if that had something to do with the timing of the holidays.

Dan Schumacher: Where they were from their budgets right as they close the year and started the new year, but.

Dan Schumacher: It was lower than we.

Dan Schumacher: We normally see a seasonal dip, but that dip was lower than than what it had been in prior years.

Speaker Change: Okay now we're back thanks, guys.

Brian Drab: Yeah. Okay, okay. And then, just in closing for me, I just want to say, you know, at the beginning of the year when we were talking about growing the injection molding business for the full year, and you'd just done 45 million in injection molding in the fourth quarter, I think a lot of people were skeptical. So, you know, some graphs on achieving that goal, which seemed like a stretch goal at the time. I'll talk to you more later. Thank you. Thank you so much.

Speaker Change: Okay. Okay, and then just in closing for me I just want to say you know at the beginning of the year.

Speaker Change: Glenn.

Speaker Change: You know we were talking about growing the injection molding business for the full year and you just done $45 million Ninja.

Speaker Change: Injection molding in the fourth quarter I think a lot of people were skeptical so congrats on.

Speaker Change: Achieving that goal it seems like a stretch goal at the time.

Speaker Change: I'll talk to you more later thank you. Thanks.

Speaker Change: Thanks, so much.

Operator: Our next question is from the line of Jim Ricchiuti with Needham & Company. Please answer your questions. Hi, thanks. Good morning.

Speaker Change: Our next question is from the line of Jim Ricchiuti with Needham <unk> Company. Please proceed with your question.

Jim Ricchiuti: Hi, Thanks, Good morning, Tien Tsin.

Jim Ricchiuti: Yes, I just want to go back to how Q4 started off. You talked about some slowing in inactivity in the early part of October. And then, you know, clearly things picked up. And I'm just wondering, as you're shifting more toward production-oriented business, it sounds like, you know, you're seeing some pretty similar trends in the current quarter. Is there any change in the linearity of the quarter with respect to, you know, what you're doing on the production side of the business? Yeah, so thanks for the question, Jim. This is Dan.

Jim Ricchiuti: Let me go back to the way Q.

Jim Ricchiuti: <unk> started off you talked about some slowing in activity in the early part of October and then clearly things picked up and I'm just wondering as you're shifting.

Speaker Change: More toward.

Jim Ricchiuti: Production oriented business it sounds like Youre seeing some almost similar trends.

Jim Ricchiuti: In the current quarter is there any change in.

The linearity.

Jim Ricchiuti: This quarter with respect to what Youre doing on the production side of the business.

Speaker Change: Yeah. So.

Speaker Change: Thanks for the question Jim This is Dan let me.

Dan Schumacher: Let me kind of walk you through what we were seeing. When I talked on the last quarterly call, what we were seeing was softness, specifically in CNC, is what I pointed out. But in the fourth quarter, as you can see from the results, we had really strong injection molding orders and larger orders in the quarter, right? As we closed out the quarter, as I was just talking to Brian about, you know, that holiday dip was lower than it normally had been, and then it was slow to kind of rebound into January.

Dan Schumacher: Kind of walk you through what we're seeing when I talked on the last quarter call that we were seeing was softness specifically in CNC.

Dan Schumacher: As what I pointed out.

Dan Schumacher: But in the fourth quarter as you can see from the results. We had a really strong injection molding orders and larger orders in the quarter right.

Dan Schumacher: As we closed out the quarter as I was just talking to Brian about.

Dan Schumacher: That holiday dip was lower than it normally had been and then it was slow to kind of rebound into January in terms of like seasonality and what we're seeing.

Dan Schumacher: In terms of, like, seasonality and what we're seeing, you know, for sure, as we get some of these larger orders coming in, you know, that can disrupt maybe what some of the seasonal trends are as we see strength in that area. Let me flip it over to Rob to talk a little bit about, you know, what we're seeing in production. Yeah, yeah, thanks, Dan and Jim.

Speaker Change: For sure as we get some of these larger orders coming in.

Speaker Change: That can disrupt maybe what some of the seasonal trends are as we see strength in that area.

Speaker Change: Let me flip it over to Rob to talk a little bit about what we're seeing in those production orders yeah.

Rob: Yes, Thanks, Dan and Jim.

Rob Bedore: You know, I'm pleased with our performance in Q4 overall, with the growth we saw there and in 2023, as a whole, right? And I'm particularly glad that we could, you know, have that kind of performance in the presence of contraction in the manufacturing sector, right? And I think we can attribute that to our ability to have done more production work with our customers across all of our services and see that growth. But, in particular, in injection molding, I think that's really been successful for us with more and more of our customers to be able to do those larger orders.

Rob: I am pleased with our performance in Q4 overall with the growth we saw there and in 2023.

Rob: As a whole right and I'm, particularly glad that we could have that kind of performance.

Rob: And in the presence of contraction in the manufacturing sector right.

Rob: And I think we attributed to our ability to have you know done more production work with our customers across all of our services and seeing that growth, but in particular in injection molding I think that's really been successful for us with more and more of our customers to be able to do those larger orders and.

Jim Ricchiuti: And as I look forward, I expect that we will have more and more of those larger orders. And that'll help to create more of that consistency, right, as we look at the business going forward. And the other thing I'm struck by, Rob, is I feel like this is the strongest growth you've shown in the US for some time. And I assume that what you're describing is really driving accelerating growth in the US, which, frankly, over the last year or so has been somewhat tepid. And it picked up quite a bit, it seems like in the US.

Rob: As I look forward I expect that we will have more and more of those larger orders.

Rob: And that will help to create more of that.

Rob: Consistency right as we look at the business going forward.

Speaker Change: And the other thing I'm struck by Robbins.

Speaker Change: This is the strongest growth.

Speaker Change: As shown.

Speaker Change: In the U S for some time and I assume that that's.

Speaker Change: What you're describing is really.

Speaker Change: It is driving to accelerating growth in the U S, which frankly over the last year or so yeah. The growth rate's been somewhat tepid and it picked up quite a bit it seems like in the U S.

Rob Bedore: Yeah, I'm very pleased with the fact that, you know, we're getting traction with our customers as a result of this strategy. Thank you. Which, which of these productions, you know, if you think about your last question for me, but think about what you're trying to do in terms of driving more production business through, through the company, through the network, where are you seeing the most traction in terms of verticals? You highlighted some use cases. So I'm just thinking in general, if any one vertical is more receptive. In the fourth quarter, we saw strength with aerospace and with automotive, you know, kind of per some of the examples that I shared in the use cases in the prepared remarks, um, and Medical Continued. Thanks a lot.

Speaker Change: Yes, I'm very pleased with the fact that we're getting traction with our customers.

Speaker Change: As a result of this the strategy so thank.

Speaker Change: Thank you.

Speaker Change: These production. So you would think about your last question for me, but you can think of that.

Speaker Change: What are you trying to do in terms of driving more production business through <unk>.

Speaker Change: The company through the network, where are you seeing the most traction in terms of verticals.

Speaker Change: You highlighted some use cases.

Speaker Change: Thinking in general if any one vertical.

Speaker Change: Market vertical is more receptive to this.

Speaker Change: During the fourth quarter, we saw strength with aerospace them with automotive.

Speaker Change: It's kind of per some of the examples that I shared and they use cases in the in the prepared remarks.

Speaker Change:

Speaker Change: And in medical continue.

Speaker Change: Sure.

Speaker Change: Thanks, a lot.

Jim Ricchiuti: Thank you. As a reminder, if you'd like to ask a question, you may press star 1. The next question is from the line of Craig Palm with Craig Hallam Capital. Please proceed with your question. Hey, good morning.

Speaker Change: Thank you.

Speaker Change: As a reminder, if you'd like to ask a question you May press star one.

Speaker Change: The next question is from the line of Greg Palm with Craig Hallum Capital. Please proceed with your questions.

Gregory William Palm: Hey, good morning, I'll offer my congratulations as well, although a good end to the year I'm curious as we think about the guide for Q1, and specifically sort of a bridge from Q4 to Q1.

Craig Palm: I'll offer my congratulations as well on a good end to the year. I'm curious, as we think about the guide for Q1, and specifically, sort of the bridge from Q4 to Q1, revenue at the midpoint, flat to down a little bit, but profitability, you know, whether it's EPS or implied EBITDA, down pretty substantially from Q4. So can you just maybe help us understand, is that, you know, higher OPEX? Is that lower margin?

Gregory William Palm: Revenue at the midpoint flat to down a little bit, but profitability, you know, whether its EPS or applied EBITA.

Gregory William Palm: Down pretty substantially from Q4. So can you just maybe help us understand is that you know.

Gregory William Palm: Higher Opex is that lower margins, maybe some of the puts and takes associated with that.

Dan Schumacher: Maybe some of the puts and takes associated with that. Yeah, great. Thanks for the question.

Speaker Change: Okay, great. Thanks for the question.

Dan Schumacher: And so a couple of things are going on quarter over quarter. One, we do expect gross margin to come down quarter over quarter. There are a couple of reasons for that.

Speaker Change: So a couple of things are going on quarter over quarter. One we do expect gross margin to come down quarter over quarter. There is a couple of reasons for that.

Dan Schumacher: First, we expect to have a higher mix of the network business in the first quarter compared to the fourth quarter. When I talked about that blip that impacted the factory business more, that softening at the end of December and the start of January impacted the factory business more than it impacted the network business. So we're going to have a headwind from a mixed perspective. Second, you mentioned volume.

Speaker Change: First we expect to have a higher mix of the network business in the first quarter compared to the fourth quarter when I talked about that blip that net impacted the factory business more of Thats that softening at the end of December started January impacted the factory business more than it impacted the network business. So we're going to have.

Speaker Change: The headwind from a mix perspective.

Speaker Change: Second you mentioned the volume we expect the volume at the midpoint to be down.

Dan Schumacher: We expect the volume at the midpoint to be down quarter over quarter because of that softness we saw. In addition, because the factory business is going to be a little bit softer, their margins are going to be a little bit lower from the fourth to first quarter because of not having as much volume to absorb those costs. And then last, SG&A will be up quarter over quarter. We have some timing issues as we start out the year.

Speaker Change: Quarter over quarter because of that softness we saw.

Speaker Change: In addition, because the factory business is going to be a little bit softer there margins are going to be a little bit loader lower from fourth to first quarter.

Speaker Change: Because of you.

Speaker Change: Not having as much volume to absorb absorb those costs and then last SG&A will be up quarter over quarter. We have some timing things as we started out the year some of those are accounting ish.

Dan Schumacher: Some of those are accounting-ish, dealing with incentive comp in terms of payroll tax accruals, vacation accruals, those types of things, as well as increased investment in the network as it grows. Those things create a headwind quarter over quarter in SG&A. Okay, that is helpful color.

Speaker Change: Dealing with incentive comp in terms of the payroll tax accruals vacation accruals those types of things.

Speaker Change: As well as increased investment in the network as it grows.

Speaker Change: Those things create a headwind quarter over quarter in SG&A.

Okay that is helpful color.

Craig Palm: And Rob, I think I heard you mentioned in the presentation that you do expect revenue growth on a year over year basis. I'm not sure if I missed it, but I didn't hear any commentary on whether you think that profitability, whether it's EPS or EBITDA, will also grow on a year over year basis. So do you care to comment on that? Sure. Yeah, thank you.

Speaker Change: And Rob I think I heard you mentioned in the prepared that you do expect revenue growth on a year over year basis, I'm not sure if I missed it but I didn't hear.

Speaker Change: Any commentary on whether you think that profitability, whether its EPS or EBITDA will also grow on a year over year basis. So do you care to comment on that.

Rob Bedore: So, yeah, we're coming off of a strong year, right, in which we grew despite challenging economic conditions with contraction in the manufacturing sector. We were able to take share last year. I'm very pleased with that. And we expect to do that again in 2024.

Rob: Sure Yeah. Thank you. So yes, we're coming off of a strong year in which we grew despite.

Rob: Challenging economic conditions with contraction in the manufacturing sector, we were able to take share last year I'm very pleased with that and we expect to do that again in 2024.

Dan Schumacher: I'll let Dan talk, you know, so on the revenue side, I'll let Dan respond regarding EPS. But you know, when I talked about on the call in terms of how 2023 played out, we had improved gross margin, both in the factory and in the network. From a factory perspective, we're deploying more and more automation in our factory. We have more robotics that are going on within our factory that allow us to vary our labor as volume comes through. On the network side, we also improved our margin in 2023, and that's through improvements in our AI-enabled pricing algorithms that we have within the network. We expect to do that on a similar basis, Greg, next year, right?

Rob: I'll, let I'll, let Dan talk so on the <unk>.

Rob: Revenue side, and I'll, let Dan respond with garden EPS when I talked about on the call in terms of how 2023 played out we had improved the gross margin both in the factory and in our network from a from a factory perspective, we're deploying more and more automation into our factory, we have more robotics that are going on.

Dan Schumacher: Within our factory that that allow us to vary our labor as volume comes through.

Dan Schumacher: On the network side, we also improved our margin in 2023 and Thats through improvements in our AI enabled.

Dan Schumacher: Pricing algorithms that we have within the network.

We expect.

Speaker Change: To do that in a similar basis, Greg next year right. So.

Dan Schumacher: So there's more automation we can bring into the factory. We have more productivity projects in the factory to make them more efficient. And we also expect on the network side that we're going to continue to work on those AI algorithms to continue to maximize the margin we have in this environment. Now, that being said, if you noticed last year, our overall margin was flat.

Speaker Change: As more automation, we can bring into the factory, we have more productivity projects in the factory to make them more efficient and we also expect Ami.

Speaker Change: Network side that we're going to continue to work on those AI algorithms to continue to maximize the margin we have in this environment.

Speaker Change: Now that being said if you can.

Speaker Change: Notice last year, our overall margin it was flat. So we do expect the network to grow more than what the factory is in 2024 and depending on how that plays out will kind of tell us. If we're if our margins are going to stay flat.

Dan Schumacher: So we do expect the network to grow more than the factory will in 2024, and depending on how that plays out, it will kind of tell us if our margins are going to stay flat or not, right? So we're driving to offer the solution to the customer that they want in this period of time, and we feel that is the business model, that is the best way for us to grow. But that may have some impact on margin as we go through 2024. Okay, understood. And then lastly, as it relates to kind of this broader strategic initiative, you know, what kind of data or metrics are you tracking that give you some sort of success, you know, a sense of the success of this, you know, combined offering and the strategy associated with that? I mean, like, what's more important?

Speaker Change: Or not right. So we're driving to offer the solution to the customer that they want in this period of time.

Speaker Change: We feel that as that is the business model that is the best way for us to grow but that may have some impact on margin as we go through 2024.

Speaker Change: Okay understood.

Speaker Change: And then lastly, as it relates to kind of this broader strategic initiative do you know what kind of data or metrics are you tracking that gives you some sort of success you have a sense for the.

Speaker Change: Success of this combined offering and the strategy associated with that I mean like.

Speaker Change: What's more important is it growing new customers is it growing wallet share with existing accounts, how do you view that.

Rob Bedore: Is it growing new customers? Is it growing wallet share with existing accounts? How do you view that? Yeah, great question.

Speaker Change: Yeah, Great question. So of course, we want to grow both our new customers and our existing customers.

Rob Bedore: So, of course, we want to grow both our new customers and our existing customers. And, and we've got initiatives in place, and our salespeople are focused on our marketing teams to really drive both of those. But what I would say from an existing customer standpoint is, you know, we've got the largest customer base in our industry. Last year, we served 53,000 customers, from individual entrepreneurs to Fortune 500, right? Within the Fortune 500, we serve 85% of the companies in our target industries.

Speaker Change: And we've got initiatives in place and our salespeople are focused and our marketing teams on.

Speaker Change: Really on driving both of those but what I would say from our existing customer standpoint, as we've got.

Speaker Change: The largest customer base in our industry last year, we served 53000 customers from individual entrepreneurs to.

Speaker Change: A fortune 500, right within the Fortune 500, we serve 85% of.

Speaker Change: The companies in our targeted industries and.

Rob Bedore: And so we've got a great customer base of innovative customers. I think there's a tremendous opportunity for us to grow and expand within our existing customers. Right, our customers are used to relying on us for their prototyping. They've been telling us for years that they'd love to use us more, and we just haven't had offers in the past.

Speaker Change: And so we've got a great customer base of innovative customers I think there's a tremendous opportunity for us to grow and expand within our existing customer base right. Our customers are used to relying on us for their prototyping they've been telling us for years that they'd love to use us more and we just haven't had offers in the past we've now.

Rob Bedore: We've now put together, between investments in the factory and the network offerings that serve them, for production that allows them to go from prototype through production through end of life that allows them to use us for quantity one or quantity a million, right? We haven't had that capability in the past, and I think there's just a tremendous opportunity for us to grow with our existing customers, and so what we're measuring to make sure that we're on top of that, I mean, we talked about the number of our customers. We talked about average revenue per customer. We also talked about tracking the number of customers that are using the combined offerings, right? We buy from both the factory and the network, and there's a number of other things kind of internally that we look at to make sure that we're making this.

Speaker Change: Put together between investments in the factory and the network offerings that serve them.

Speaker Change: For production that allow them to go from prototype through production through end of life.

Speaker Change: That allows them to use us for quantity, one or quantity of $1 million right. We haven't had that capability in the past and I think there's just tremendous opportunity for us to grow with our existing customers.

Speaker Change: And so what we're measuring to make sure that we're on top of that I mean, we've talked about.

Speaker Change: The number of our customers we talked about average revenue per customer. We also talked about tracking the number of customers that are using the combined offerings right buying from both the factory in the network.

Speaker Change: And there's a number of other things kind of internally that we look at to make sure that we're making this progress, but I'm quite pleased with the progress that we showed last year along these lines.

Rob Bedore: But I'm quite pleased with the progress that we showed last year. At some point, you know, some of those KPIs associated with, you know, the number of customers using, you know, either or both of the services, is that something that you might start disclosing? Yeah, great. The answer is yes. You know, I think, in this industry, in this space, right, being able to serve a customer more, get more of their wallet share of our existing customers is, you know, it's going to generate a more profitable business long term, rather than having to continue to chase new customers every year. Of course, we're still going to grow new customers; we're doing that.

Speaker Change: At some point and you know some of those kpis associated with number of customers using.

Speaker Change: Either or both of the services is that something that you might start disclosing.

Speaker Change: Yeah, Greg the answer is yes.

Speaker Change: I think.

Speaker Change: In this industry in this space right.

Speaker Change: Being able to.

Speaker Change:

Speaker Change: Serve a customer more get more of their wallet share of our existing customers is.

Speaker Change: It's going to generate a more profitable business long term rather than having to continue to chase the new customer.

Speaker Change: Every year of course, we're still going to grow new customers, we're doing that but but for sure as <unk>.

Craig Palm: But, but for sure, as in the future, we will share some of these. Okay. Best of luck. Thanks. Thank you. Thank you. We've reached the end of our question and answer session. This will also conclude today's conference. You may disconnect your lines at this time. We thank you for your participation and have a wonderful day.

Speaker Change: In the future we will share some of these metrics.

Speaker Change: Okay.

Speaker Change: Best of luck. Thanks.

Speaker Change: Thank you.

Speaker Change: Thank you we've reached the end of our question and answer session. This will also conclude today's conference you may disconnect. Your lines at this time, we thank you for your participation and have a wonderful day.

Speaker Change: Okay.